When you see what appear to be good, well-established, long-standing companies suddenly fall apart it makes you wonder:
“How do good businesses go bad?”
When you take a close look at companies that get into trouble, there tends to be a common denominator that leads to their demise. That is, in simple terms, they get distracted and forget to follow the rules.
The grain business is no exception to distraction. The commodity markets by nature attract a lot of “noise” that can steer even the soundest of companies off course. It takes a constant dedication to keep on a disciplined track, especially when there is a lot of hype over the newest, latest and greatest idea.
But, as it has been proven time and time again, those that stay focused on the core disciplines of their business stand strong no matter what the economic environment. It may not be sexy…but it works!
When it comes to the country elevator, the principles that keep it on solid economic ground begin with these five disciplines:
1) There is a quotation by writer Sydney Smith that says it best:
“Be what nature intended you for and you will succeed.”
The country elevator is uniquely positioned in the marketplace to service the diverse needs of the producers and users in the local trade area. By focusing its resources to provide services of value to these two sectors, the country elevator fulfills its natural role in the marketplace, and in doing so secures its own success.
2) Business 101 also teaches us that “you can’t be everything to everybody.” In the effort to provide service, you must be careful that you do not get sidetracked into areas that are not your core business. It is important to decide what you are good at and focus your efforts on doing it well.
3) Adhere to clear, disciplined and proven practices in all aspects of your business. Nothing about the grain business needs to be overly complicated or sophisticated to work. Whether it’s marketing alternatives for your customers or merchandising your own basis positions, taking an approach that is simple, sensible and easily understood gets long-lasting, proven results – and keeps you out of all kinds of trouble.
4) Focus your time and resources on the things you can affect. For example, discussions with customers about their marketing plans and profitability are valuable points of contact that lead to meaningful decisions. On the other hand, debates over which way prices are going are rarely productive. The challenge is to eliminate the distractions, decide what is important and direct your company’s energies toward meaningful, result-oriented activities.
5) Last but not least, companies must be fiscally responsible in all environments. Yes… that means “saving for a rainy day.” For the country elevator, it’s all about building working capital. When times are good it is the opportunity to build capital that will grow the business into the future. And, don’t think we won’t see periods of high prices again. It’s just a matter of when. Being prepared financially for any environment is an important discipline that must never be forgotten.
Topics: Grain Merchandising